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Sugar woes sink sacco, regulator warns worse to come

sugar factory
Tractors deliver cane at a sugar factory in western Kenya. FILE PHOTO | NMG 

Mumias-based Nitunze Sacco, formerly Mumias Out-growers Sacco Society, lost its licence because members defaulted on the entire Sh160 million loan portfolio as the sugar industry ran into problems.

According to the Sacco Societies Regulatory Authority (Sasra), Nitunze failed to meet its financial obligations largely due to the fact that nearly all it members were sugarcane farmers, many of whom obtained loans from the sacco hoping to repay using proceeds from farming.

However, the failure by factories such as Mumias Sugar #ticker:MSC to pay farmers their dues led to mass abandonment of cane farming, deductions from the cane produce meant to repay farmers’ loans were not remitted to the sacco.

“Consequently, the entire loan portfolio of the sacco amounting to over Sh160 million degenerated into default and thus total loss with very little prospect of recovery,” noted Sasra in the latest supervision report for the sacco sector.

The authority warned that other deposit-taking saccos operating in the sugarcane growing belt and whose membership is drawn from the farmers and associated sugar factories are likely to face similar difficulties in the short to long term.

Sasra said that Nitunze’s woes put into question the wisdom of some saccos operating in vulnerable economic sectors yet continuing to retain restrictive membership eligibility criteria. “This calls for urgent diversification of business operations, products and member catchment area base for such saccos.”

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